Professional and legal case news - 28 March 2008

Jonathan Ross hears how a property owner was unable to control a nearby development, while Warren Gordon learns that negligence claims will be dismissed if made after the six-year deadline

Mariner rights are ancient

The message A purchaser of a property cannot necessarily assume it will acquire all the rights previously enjoyed by the vendor.

The Case A hotel developer sought to establish that it did not need the consent of the current owner of a neighbouring property to be able to proceed with its redevelopment (City Inn (Jersey) v 10 Trinity Square, 06.03.08).

The site of 10 Trinity Square was formerly the headquarters of the Port of London Authority. The authority also owned a neighbouring building called Mariner House. When the authority sold Mariner House in 1962, the transfer provided that the purchaser and its successors would not make any external alterations to Mariner House or use it, other than as offices, without the consent of the transferor. The transfer defined the transferor as the Port of London Authority.

City Inn is now the owner of Mariner House and has obtained planning permission to knock it down and build a hotel in its place. It has obtained the consent of the authority to this, but the authority no longer owns 10 Trinity Square, as it sold it in 2006 a new owner, known as 10 Trinity Square Ltd, and moved away from the area completely.

The new owner claimed that, although the transfer in 1962 only referred to the authority’s consent being required, and made no reference to any successors in title, the restrictions then imposed on Mariner House were not just for the benefit of the authority, but also any subsequent owner of 10 Trinity Square.

The new owner contended that it was commercially absurd for the authority to retain control over redevelopment and use of Mariner House when it would be completely unaffected by any redevelopment as it had sold its adjoining building and moved away.

The judge upheld the claim by City Inn that its proposed works and change of use to Mariner House did not require the new owner’s consent. The new owner appealed to the Court of Appeal. It argued that, although the draftsman of the transfer had defined the transferor as just the authority, and made no reference to successors in title, this made no commercial sense.

The new owner argued that the authority must have intended that any purchaser of 10 Trinity Square would inherit the rights to control the use and development of Mariner House. It argued this would have benefited the authority, as it would increase the price it could achieve for its building.

The Court of Appeal stated that, where a draftsman had clearly defined a term, the court would only find that a different meaning was intended if it would be commercially absurd if the term was only given its defined meaning. A court cannot simply rewrite an agreement to give it more commercial sense.

While it does not now make much sense for the authority to have agreed not to be able to pass on the rights when it sold and moved away, the court held that a sale was simply not contemplated in 1962. The authority was well ensconced in its grand headquarters building. It had thought it would never sell, and it had not given any consideration as to what would happen should it move.

Furthermore, it may have been the case that the parties had agreed that only the authority should have any say over the future use and development of Mariner House.

The appeal was dismissed and the redevelopment was able to proceed.

Summing Up: City Inn v 10 Trinity Square

A hotel developer that acquired a property in 2006 claimed it had the right to control the development of an adjacent building as a hotel.

It claimed that the right to enforce restrictions on development had passed from the previous owner of its property to itself.

The Court of Appeal ruled that the rights had not passed and the development could proceed.

Jonathan Ross is head of property litigation at Forsters

Knocked for six

The message Do not delay in bringing proceedings, otherwise rights could be lost.

The Case In S and E Watkins v Jones Maidment Wilson (04.03.08), the Court of Appeal decided a preliminary issue on whether proceedings against solicitors for allegedly negligent advice foundered because they were issued too late.

In 1997, the Watkins agreed to buy a site in Rochdale from Mr Fleming who, with another, was to build a house for the Watkins on the site. The Watkins instructed Jones Maidment Wilson to act as their solicitor in relation to the transaction.

In April 1998, the Watkins and Fleming entered into a building agreement, which stated that if Fleming failed to complete the building works by 31 August 1998, the Watkins could terminate the agreement and pay for the work completed by that date.

If there was a dispute over the value of the completed work, the parties could appoint an expert to decide the amount due.

On 6 August 1998, before the house was completed, the Watkins wrote a letter to Fleming waiving the 31 August completion date insofar as it related to particular works. Subsequently, a dispute arose between the Watkins and Fleming, and it was alleged that the effect of the Watkins’ letter was to waive, or give up, the right under the agreement to refer the dispute to expert valuation.

The Watkins alleged that they obtained the law firm’s advice on the agreement and also on the waiver letter. They said the advice was negligent and they suffered substantial loss as a result. They argued that, if they had not lost the right to refer the dispute, it would have been resolved swiftly and economically to their satisfaction.

However, because they were unable to exercise the right to refer to expert valuation, they became locked into an expensive dispute, and the Watkins argued that they had wasted costs amounting to £50,000.

The Watkins issued proceedings against Jones Maidment Wilson on 26 August 2004. They sought damages for professional negligence. The law firm denied the Watkins’ allegations and argued that the proceedings were issued too late, and as a consequence failed.

Under the Limitation Act 1980, a claim in respect of negligent advice must be brought within six years of the date on which the ‘cause of action’ arose. Jones Maidment Wilson argued that any advice, the agreement and the letter occurred more than six years before the issue of proceedings by the Watkins.

They countered by arguing that the limitation period of six years began from a later date when the transaction started to become disadvantageous to them and they actually suffered a loss as a result of the law firm’s allegedly negligent advice. The Watkins argued that this later date was less than six years before their proceedings were issued.

The Court of Appeal, however, rejected the Watkins’ argument. The court held that the Watkins’ loss occurred when the Watkins actually entered into the agreement with Fleming and sent the waiver letter. It was at those points that they lost the chance to negotiate a better building agreement and the right to refer the dispute to expert valuation. The proceedings were issued too late.

This case did not decide whether the allegations in relation to the effect of the Watkins’ letter or Jones Maidment’s conduct were correct. Instead, it decided a preliminary issue on whether the Watkins had issued their proceedings against Jones Maidment Wilson in time.

It remains to be seen what happens next in respect of the alleged negligence.

Summing Up: Watkins v Jones Maidment Wilson

In 2004, the Watkins began proceedings against Jones Maidment Wilson. They alleged it had given negligent advice on a property deal.

The law firm denied the allegations, but argued the claim had been filed after the six-year limitation period and should be dismissed.

The Watkins argued they had only begun to suffer the effects of the alleged negligence more recently, so their claim was within the time limit.

The Court of Appeal rejected this argument, but has not ruled on the alleged negligence.

Warren Gordon is head of real estate know-how at Olswang

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